Samsung hikes processor fabrication prices on Apple by 20%

Samsung has reportedly raised the prices they charge for manufacturing chipsets like the iPhone 5's Apple A6 by a whopping 20%. While no reason for the increase was given, Apple’s increased demand for processors, as many as 200 million chips this year, up from 130 million last year, could be a factor. Whatever the case may be, Apple seems to have little choice but to agree to the price hike, having no viable alternative suppliers at this point. MarketWatch reports:

According to the report, Apple buys all APs used for production of iPhone and iPad from Samsung Electronics with the volume estimated to be 130 million units last year and more than 200 million units this year.

Samsung Electronics has a long-term contract to supply APs to Apple until 2014, the report added.

There have been rumors that Apple will be switching away from Samsung for future processors. Apple’s contract with Samsung may throw some doubt on previous reports that a switch to a new manufacturer would come by the end of next year. However, it is not stated whether or not Samsung’s contract is exclusive, and in any case, if Apple were to make a transition to a new chip manufacturer, they would probably still need Samsung to produce their older chips, so it’s no surprise that a contract is in place through 2014.

There may be concerns that older chips like the A5 may have some Samsung design elements, and are in some way subject to Samsung’s patents. This would make it difficult for Apple to have them made by another supplier without paying Samsung a fee, or else opening themselves up to a lawsuit.

This incident demonstrates why it is necessary for Apple to not only move away from a rival for a part of their most important business, but also why it is important to have more than one supplier of key components.

Samsung hikes processor fabrication prices on Apple by 20%

At this point, it shouldn't be about "Serves them right", or "What a-holes". These are two very big companies that are moving very recklessly. As consumers, we shouldn't take sides, but just take a step back and watch, because these are all very big events that will lead to something very different if things keep up.

A Samsung official has reportedly denied claims that the company has raised the price it charges Apple for its iPhone and iPad processors by almost 20 percent. Speaking with Korean newspaper The Hankyoreh, the unnamed official added that prices were agreed upon at the beginning of each year and "aren't changed easily."

Monday's report in rival paper Chosun claimed Apple and Samsung have a supply agreement that runs through to 2014, and unless "special cost factors" were involved, unit prices have traditionally stayed level.